Exercises for chapter 2 and 3 of Microeconomics. chapter 2 and 3 of Microeconomics Seventh Edition 7th N.Greogory Mankiw Business Administration (Faculty of Business Administration) Exercises for practice. Bài tập môn Kinh tế Vi mô chương 2 và 3
PRINCIPLES OF MICROECONOMICS INSTRUCTOR: NGUYEN VIET HOA (0378418749) EXERCISES FOR CHAPTER 2+3 Exercise 1: Suppose the market for good A has supply and demand function as follow: P ($/unit) 60 65 70 75 Q (unit) 280 270 260 250 Q (unit) 10 1) Build demand function and supply function for good A 2) Determine the market equilibrium 3) Calculate price elasticities at the equilibrium point What is the meaning of these elasticities? If government imposes a tax of t $/unit on sellers, who will bear a larger part in the tax burden? 4) Calculate total revenue received by sellers at the equilibrium point If sellers want to increase their total revenue then should they raise or reduce the price? 5) Calculate CS, PS, TS at the equilibrium point 6) Government imposes a price ceiling of 165$/unit a) What will happen in the market? b) Calculate the surplus or shortage amount c) Calculate government’s expenditure if government wants to supply all the shortage amount or buys all the surplus amount given the import price is 165$/unit d) Calculate CS, PS, TS, DWL (if exists) 7) Government imposes a price floor of 185$/unit a) What will happen in the market? b) Calculate the surplus or shortage amount c) Calculate government’s expenditure if government wants to supply all the shortage amount or buys all the surplus amount d) Calculate CS, PS, TS, DWL (if exists) 8) Government imposes a tax of 30$/unit on sellers a) Calculate new equilibrium price and quantity in the market b) Calculate government’s tax revenue c) Divide tax burden for buyers and sellers d) Calculate price elasticity of demand in the price range before and after tax e) Calculate CS, PS, TS, DWL (if exists) in this case 9) In order to keep the price P = 165$/unit and quantity as when the government supplies all the shortage amount: a) Should the Government impose tax or subsidize for producers? Determine the size of per unit tax or subsidy in this case viethoa.k52@ftu.edu.vn PRINCIPLES OF MICROECONOMICS INSTRUCTOR: NGUYEN VIET HOA (0378418749) b) Calculate government’s tax revenue or expenditure in this case c) Calculate the incidence of subsidy or tax for consumers and producers d) Calculate price elasticity of demand in the price range before and after tax or subsidy e) Calculate CS, PS, TS, DWL (if exists) in this case 10) Assume that a rise in income makes quantity demanded increase by 60 units at every price level Determine the new market outcome 11) Assume that a rise in the input price makes quantity supplied decrease by 30 units at every price level Determine the new market outcome Exercise 2: Suppose the market for good A has supply and demand function as follow: P (USD/unit) 12 14 16 18 Q (unit) 26 25 24 23 Q (unit) a) Build demand function and supply function for good A Determine the market equilibrium b) Government imposes a price ceiling of 30USD/unit and supplies all the shortage amount Determine the actual quantity transacted in the market? c) If the Government doesn’t want to impose price ceiling but still desires the same outcome as part (b), should the Government impose tax or subsidize for producers? Determine the size of that subsidy or tax Exercise 3: Suppose the market for good A has supply and demand function as follow: P = 24 – 3Q P = 6Q + (P: USD/kg, Q: kg) a) Calculate equilibrium price and quantity Calculate price elasticity of demand and price elasticity of supply at the equilibrium point b) Government imposes a price ceiling of 12USD/kg, what will happen in the market? Calculate government’s expenditure if government wants to supply all the shortage amount c) Assume that an increase in income makes demand increase by 0,5kg at every price level Calculate new equilibrium price and quantity in the market Exercise 4: Suppose the market for good A has supply and demand function as follow: Q = 800 – 10P Q = 10P – 100 (P: thousand VND/kg; Q: tons) a) Calculate equilibrium price and quantity Calculate price elasticity of demand and price elasticity of supply at the equilibrium point viethoa.k52@ftu.edu.vn PRINCIPLES OF MICROECONOMICS INSTRUCTOR: NGUYEN VIET HOA (0378418749) b) Government imposes a price floor of 50.000 VND/kg, what will happen in the market? Calculate government’s expenditure if government buys all the surplus amount c) Government imposes a tax of 5.000 VND/kg on sellers Calculate government’s total tax revenue? Divide tax burden for buyers and sellers Exercise 5: Suppose the market for good A has supply and demand function as follow: P = 300 – 0,2Q P = 30 + 0,1Q (P: thousand VND/kg; Q: tons) a) Calculate equilibrium price and quantity Calculate price elasticity of demand and price elasticity of supply at the equilibrium point b) Government imposes a price ceiling of 100.000 VND/kg, what will happen in the market? Calculate government’s expenditure if government supplies all the shortage amount c) Government imposes a tax of 9.000 VND/kg on sellers Calculate government’s total tax revenue? Divide tax burden for buyers and sellers Exercise 6: Consider the market for good X with the following supply and demand conditions: P = 140 – 0,1Q P = 20 + 0,2Q (P: $/unit; Q: million units) a) Determine the market outcome Calculate price elasticity of demand and supply at the equilibrium b) If the Government imposes a price ceiling of 90$/unit and then import to supply the shortage amount, determine the market price and quantity c) If the Government desires the same outcome as part (b), should the Government impose tax or subsidize for producers? Determine the size of per unit tax or subsidy in this case Calculate the incidence of subsidy or tax for consumers and producers Exercise 7: In the market for good A, equilibrium point is P = and Q = At the price level P = 7, quantity supplied is 3kg while quantity demanded is 1,75kg a) Build demand function and supply function for good A b) Calculate price elasticity of demand and price elasticity of supply at the equilibrium point c) If the government imposes a tax of t $/unit on sellers, who will bear a larger part in the tax burden? d) Assume that an increase in income makes quantity demanded increase by 1kg at every price level Calculate new market equilibrium viethoa.k52@ftu.edu.vn ... 30 units at every price level Determine the new market outcome Exercise 2: Suppose the market for good A has supply and demand function as follow: P (USD/unit) 12 14 16 18 Q (unit) 26 25 24 23 ... revenue? Divide tax burden for buyers and sellers Exercise 5: Suppose the market for good A has supply and demand function as follow: P = 30 0 – 0,2Q P = 30 + 0,1Q (P: thousand VND/kg; Q: tons) a)... = and Q = At the price level P = 7, quantity supplied is 3kg while quantity demanded is 1,75kg a) Build demand function and supply function for good A b) Calculate price elasticity of demand and